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2016 (4) TMI 474 - ITAT DELHI

2016 (4) TMI 474 - ITAT DELHI - TMI - Additions of share capital & unsecured loans - Held that:- We are of the opinion that the assessee has failed to discharge its onus to establish identity of the shareholders, genuineness of the transactions and creditworthiness of the shareholders in relation to the addition of ₹ 13 lakh made by the assessing officer. Thus we hold that there is no infirmity in the findings of the Commissioner of income tax (Appeals) on the issue in dispute. Also AR cou .....

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the name of the person to whom the unexplained cash credit belonged. - Decided against assessee - ITA No. 1606/Del/2012 - Dated:- 11-3-2016 - SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For The Assessee : Shri Sanjeev Agarwal, Adv. For The Revenue : Shri T. Vasanthan, Sr. DR ORDER PER O.P. KANT, A.M.: This appeal of the assessee is directed against order dated 23.01.2012 of the CIT(A)-XVIII, New Delhi, for assessment year 2006-07, raising following grounds of appeal :- .....

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ses of all share holders & unsecured loans to the assessing officer and despite repeated requests of the assessee, the assessing officer did not examine them for their creditworthiness, identity or genuineness. The assessing officer failed to do so even after the matter was remanded to him twice by Ld. CIT(A). 4. That the Ld. CIT(A) has made gross errors in facts & law in observing that the identity of shareholders are doubtful on the basis of PAN or Voter ID Cards. As a matter of facts, .....

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cumulative manner without discussing individual cases and made high pitched additions without justification. 7. That under the facts & circumstances of the case, the Ld. CIT(A) had made gross errors in facts & law in sustaining the additions made by the assessing officer. 8. That the Ld. CIT(A) has sustained the additions in violation of the binding precedents of superior Courts of law. 9. That under the facts & circumstances of the case, the order u/s 250 of Ld. CIT(A) and the asses .....

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as paid on the book profit ₹ 27,620/-. The case was selected for scrutiny and in the course of scrutiny the Assessing Officer observed that share capital of ₹ 13,00,000/- was introduced by the assessee company during the year. The Assessing Officer asked documents in respect of identity and creditworthiness of the share applicant/holder and genuineness of the transactions. In response, the assessee filed only name and address of the share applicants/ share holders and other documents .....

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from eight parties. In respect of the two parties, the assessee submitted proof in support of identity, bank statement and their Income Tax Returns. The Assessing Officer accepted their creditworthiness and in absence of documents in respect of the other parties, he held the balance unsecured loan of ₹ 58,54,200/- as unexplained cash credit. Aggrieved, the assessee filed appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee filed copy of Voter Identity Card / Permanent Account .....

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onal evidence in the Rule 46A of the Income Tax Rules, to the Assessing Officer for his comments. The Assessing Officer though objected to the admission of additional evidences, however, sent remand report stating that the assessee was neither fulfilled the requirements of section 68 of the Act before the AO nor before the CIT(A) and therefore, the addition need to be sustained. The CIT(A) after providing opportunity of hearing to the assessee sustained the addition of 13,00,000/-. Similarly the .....

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ed such a huge profit shown after commencing its manufacturing activities. In support of his contention, he relied on the judgement of Hon ble Supreme Court in the case of Commissioner of income tax versus Bharat Engineering And Construction Company (1972) 4 SCC 401. He, further submitted that even advances to the suppliers of machinery and preoperative expenses have also been added as unexplained loans without application of mind. Whereas, the ld. Senior DR on the other hand submitted that in B .....

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hat it was the income of the assessee and no further burden lies on the assessing officer to show that income in question comes from any particular source. 3. 2 We have heard the rival submissions and perused the material on record. We find that the Hon ble Supreme Court in the case of Commissioner of income tax v/s Bharat Engineering And Construction Company (supra) has held as under: The controversy in this appeal is whether a question of law arises from the order of the Tribunal. The Tribunal .....

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ed the Tribunal under s. 66(1) of the Indian IT Act, 1922, to refer certain questions to the High Court for its opinion. The Tribunal rejected the application on the ground that its findings are findings of fact and that no question of law arose from them. Thereafter, the assessee moved the High Court under s. 66(2). That application was rejected by the High Court. Against that decision this appeal has been brought by special leave. 2. The assessee-company is an engineering construction company. .....

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a cash credit entry of ₹ 35,000. These cash credit entries total up to ₹ 2,50,000. The ITO called upon the assessee to explain those cash credit entries. The explanation given by the assessee was found to be false by the ITO, the AAC and the Tribunal. But, all the same, the Tribunal felt that these cash credit entries could not represent the income or profits of the assessee-company as they were all made very soon after the company commenced its activities. In our opinion, though the .....

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assessee had not come out with the true story as regards the person from whom it got those amounts. It is true that in the absence of satisfactory explanation from the assessee the ITO may assume that cash credit entries in its books represent income from undisclosed sources. But what inference should be drawn from the facts proved is a question of fact and the Tribunal's finding on that question is final. 3. The High Court after careful examination of the various findings reached by the Tr .....

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vering that this judgement held as under: 19. It is well settled that the assessee must discharge the burden of proving the identity of the creditors and also to give the source of the deposits. In other words, the creditworthiness of the depositors must be established to the satisfaction of the AO. Where there is an unexplained cash credit, it is open to the AO to hold that it is income of the assessee and no further burden lies on the AO to show that income in question comes from any particula .....

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ssed. 4. In ground Nos. 2 to 10, the assessee has raised issue of holding share capital of ₹ 13,00,000/- and unsecured loans of ₹ 58,54,280/- as unexplained by the Assessing Officer and confirmed by the CIT(A). In respect of the grounds, the ld. AR submitted that the assessee could not be asked to furnish source of source. Further, he submitted that the assessee had supplied addresses of the share holders and persons who provided unsecured loans to the AO, despite that, the AO did no .....

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also submitted that all the loans were received and returned through banking channel, which confirmed the genuineness of the transaction. He also reiterated the grounds of appeal raised in the appeal. Further he relied on the judgment of Hon ble Apex Court in in the case of CIT Vs M/s Divine Leasing & Finance Ltd in S.L.P.(C) / 2008 (CC 375/2008), wherein it is held that if the share application money is received by the assessee company from alleged bogus share holders, whose names are give .....

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to 76. We find that in the grounds, the assessee has agitated with two additions. The first addition is in respect of unexplained share capital of ₹ 13,00,000/- and the second addition is in respect of unexplained unsecured loans of ₹ 58,54,200/- . The facts in respect of share capital of ₹ 13,00,000/- are that it was received in cash from the friends and relatives of the promoters/ directors of the assessee company and before the Assessing Officer no confirmations, proof in s .....

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n the assessee, Before the CIT(A), the assessee also stated that the income of the share holders was below taxable limit during the relevant period, however, no evidence in support of the source of income in their hand or the creditworthiness of those persons were filed. It is evident from the above facts that the primary onus was on the assessee to file documents in support of identity, genuineness of the transaction and creditworthiness of the shareholders, however, the assessee has filed only .....

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iption, where as in the case of the assessee all the share holders are relative and friends of the assessee and they have applied in cash. In view of above facts and circumstances, we are of the opinion that the assessee has failed to discharge its onus to establish identity of the shareholders, genuineness of the transactions and creditworthiness of the shareholders in relation to the addition of ₹ 13 lakh made by the assessing officer. Thus we hold that there is no infirmity in the findi .....

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ect of those two persons were accepted and the credit from the balance persons of ₹ 58,54,200/- was held as unexplained in terms of section 68 of the Act. Before the ld. CIT(A), the assessee filed copy of bank statement of the unsecured loan creditors, however, no document in support of creditworthiness were filed. The relevant finding of the ld. CIT(A) on the issue of addition of unsecured loan creditors is as under : The appellant has been unable to explain the creditworthiness of the cr .....

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re and source of the sums found credited in the books was not satisfactory there was, prima facie, evidence against the assessee, viz., the receipt of money. The burden was on the assessee to rebut the same, and, he failed to rebut it, it can therefore be held against the assessee that it was a receipt of an income nature. The appellant has failed to discharge its onus to produce legally acceptable evidence of creditworthiness of the creditor. The expression the assessee offers no explanation me .....

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